EU orders 35 companies to pay $765M in taxes

EU orders 35 companies to pay $765M in taxes

Thirty-five large companies have been ordered to fork over $765 million in tax breaks that European Union regulators have ruled were illegally provided by Belgium. The European Commission, the EU’s top anti-trust regulator, said Monday that a tax benefit provided by Belgium allowed large, multinational companies to forgo taxes on as much as 90% of their profits — thus allowing them to pay “substantially less” than their competitors.

This type of preferential tax structure, which was marketed by Belgium’s tax authority under the logo “Only in Belgium,” is illegal under EU rules, the regulator said. Belgium was ordered to recover as much as $765 million from the 35 companies that benefited from the tax breaks. “Such schemes put smaller competitors at an unfair disadvantage,” the European Commission’s Margrethe Vestager, said in a statement. “They are active in the same markets and have to pay their taxes fair and square,” she said.

The ruling marks the latest effort by the top EU regulator to crackdown on special tax breaks provided by EU member countries to companies like Apple Inc., Amazon and McDonald’s. Among the companies impacted by Monday’s ruling is Belgian-based Anheuser-Busch InBev, which is in the midst of a $108 billion deal to buy fellow brewer SAB Miller Plc. The EC has declined to name the companies involved at this time, said Yizhou Ren, a spokeswoman.

The tax scheme in question has been in place in Belgium since 2005. It has allowed Belgian tax authorities to lower that tax base of multinational companies by deducting so-called “excess profit.” The tax breaks are based on the assumption that multinational companies, due to their economies of scale, earn profits that other companies do not make. Belgian law requires both stand-alone companies and multinational companies “to pay taxes on the profits they actually record in Belgium,” Vestager said.

The majority of the companies impacted are European and will have to repay an estimated $544 million out of the estimated $765 million total, the EU watchdog said. The European Commission has also ensnared large U.S. companies in its tax probes, including a ruling last year targeting taxes it said are owed by Seattle coffee brewer Starbucks. The watchdog also made waves last year when it opened an antitrust probe into Internet giant Google amid concerns that the tech giant has stifled competitor’s access to its Android operating system, which dominates the global mobile phone market.